The International Finance Corporation (IFC), the private investment arm of the World Bank, and the European Bank for Reconstruction and Development (EBRD), are advising Kazakhstan’s Ministry of Investments and Development on the tender process, launched Wednesday, of a landmark toll road public-private partnership (PPP) worth $680 million.
The project, known as BAKAD, is a 66-kilometer ring road north of Almaty in the south of the Central Asian country. Involving a 20-year concession contract, it is the first project in the toll road sector to be financed, built, operated and maintained by a private company.
“The toll road will help jump-start private sector investment in Kazakhstan’s infrastructure sector, exemplifying how public-private partnerships can help meet a country’s infrastructure needs,” said Moazzam Mekan, IFC regional manager for Central Asia.
The road will reduce travel times around Almaty and greatly improve access to markets for local businesses essential to the country’s economic development.
The pre-qualification submission deadline has been set for March 18 and bid submission deadline for September 15.
BAKAD is the first PPP structured under a new regulatory framework. Substantial amendments to the existing legislation were passed in June 2014 as part of the new reform programme in Kazakhstan. The legislation allows international investors the necessary conditions to be able to invest in PPPs such as BAKAD.
IFC will help authorities vet private sector operators' bids by carrying out technical due diligence while the EBRD will be overseeing legal issues likely to arise during the process, and have helped authorities with procurement. IFC is also expected to help finance the project.
The concession contract is based on an availability payment scheme which means less risk for the operator (compensation is based on lanes available rather than the less predictable amount of traffic), said the IFC in an email communication with Infrastructure Investor.
Kazakhstan is currently focusing on transport infrastructure, which is high on the government’s agenda.
The project is part of a wider IFC effort to encourage economic growth in the country which includes strengthening the financial sector, improving access to infrastructure, and promoting the development of small- and medium-sized enterprises in a country too dependent on its natural resources exploitation.
IFC began operating in the country by pioneering advisory services focused on private sector development. Since the beginning of investment operations in 1997, IFC has invested about $1.66 billion, including mobilisation from partners of nearly $300 million, to support 61 private sector projects across various industries, including agribusiness, financial services, manufacturing, and oil and gas.